Zions: Growth Initiatives and NII Guidance Hint at a Brighter Year Ahead

Deposit competition is fierce, but fee income breadth and an asset-sensitive balance sheet give Zions room to talk up mid-single-digit NII growth.

ZION · Earnings Call · 2026-07-20

The Quarter: Strong Core, Exceptional Tailwinds

Zions’ second-quarter 2026 results were flattered by two one-off items – a $215 million pretax gain on Visa Class B shares and an unrealized SBIC gain – but the underlying business showed real momentum. “Net earnings available to common shareholders was $452 million or $3.05 per share, including a couple of exceptional items” — Harris Henry Simmons, Chairman and Chief Executive Officer · 2026-07-20 – excluding those, EPS came in at $1.74, up 10% from a year ago. The breadth of the improvement was notable: customer-related non-interest income grew 10% y/y, led by capital markets, and the bank’s broad based fee growth is becoming a more durable part of the story. Loan growth was also constructive – average loans rose 4.7% annualized, driven by C&I and with only modest spread compression. Executives were careful to stress that the bank is not chasing hot money or private credit: “our loan growth has been really disciplined. it is been muted by the fact that we have not been gulping down NDFI loans.” — Scott A., Chief Operating Officer · 2026-07-20

The NII Balancing Act

The headline for the year ahead is the NII guide: "moderately increasing" for the third quarter, but for the year-ahead (2Q27) the bank points to upper single-digit NII growth if the forward curve’s one-to-two rate hikes materialize.

Hey, you nailed it, Kenneth. And listen. Sometimes the words get in the way. that is why we try to come over the top with some additional narrative. We do not really have a great word for where the better part of moderately increasing and such a level of– so you could say increasing, but it would be what are you talking about.
Robert Ryan Richards, Chief Financial Officer · 2026-07-20

The asset-sensitive balance sheet is the key lever. “It is a competitive environment. On both sides of that equation.” — Robert Ryan Richards, Chief Financial Officer · 2026-07-20 Deposit costs are sticky, but the bank is investing heavily in granular deposit campaigns – including the Gold account and the new business beyond account – and is pulling wholesale deposits back onto the balance sheet at spreads of 30–40 basis points to overnight borrowings. That gives management confidence that even without a rate move, NII can grow; with a hike, the guide moves meaningfully higher. As CFO Ryan Richards put it, "we still think internally about things like latent emergence," pointing to the fixed-asset repricing tailwinds that remain.

Deposit Strategy Takes Shape

The deposit push is the crux of the story. The bank has brought on 10,000 new Gold and business beyond accounts this year, and the granular deposit engine is expected to replace higher-cost brokered funding over time. Business beyond account is designed to serve small businesses with cash flow management and money movement, and early traction has been strong. The bank’s funding sources are diversifying: average broker deposits plus net overnight borrowings stand at about $2.5 billion, and the bank is deliberately moving those into relationship deposits. The NII guidance also reflects a deliberate decision to let the loan book outpace deposits for now, while relying on securities cash flows to fund growth. That dynamic is visible in the fundamentals: net interest income reached $662 million in Q1 2026, up 6% y/y, while total deposits grew just 2%. The bank has room to run the loan-to-deposit ratio higher before it needs to worry about stable funding.

Credit and Capital: Room to Run

Credit quality remains benign – net charge-offs of just 6 basis points and criticized balances declining. The allowance is 1.13% of loans, and management stresses that the reserve is well positioned across economic scenarios. On capital, tangible book value is up 22% y/y, and the bank is approaching the point where it can return more to shareholders. “I would expect that will incrementally continue to increase the capital repatriation to our owners” — Harris Henry Simmons, Chairman and Chief Executive Officer · 2026-07-20 – Harris Simmons. The pending Basis Investment Group acquisition (closing in 3Q) will use some capital but also extends the multifamily franchise. The AOCI accretion continues to close the gap to peers, and with CET1 at 11.8% (including AOCI), the bank has capacity for both buybacks and opportunistic M&A.

Outlook vs. History

This quarter’s guidance reflects a meaningful shift from the prior tone. In January, management was cautious about NII, but by April it began to hint at upside. “For our NII guide, that's the shorter view is how we guide that. So certainly at the upper end of moderately increasing and we think the ability to overachieve if rates hang in for us.” — R. Richards, Chief Financial Officer (CFO) · 2026-04-21 And the 3.5% NIM long-term target that Harris floated last year is still on the table. “I think it was – this is Harris. I think I'm the one who put that concept out there. I think that over – like an economist, skip the number or a date but never both.” — Harris Simmons, Chief Executive Officer (CEO) · 2025-10-20 If deposits cooperate, Zions could deliver the rare combination of NII growth and fee acceleration into 2027.